Many employers seek to adopt wellness programs to decrease healthcare costs and improve employee productivity. When designing and maintaining such programs, however, employers need to take into account federal and state laws aimed at protecting employee health privacy. This task is complicated by the fact that a program's structure can determine which laws apply. Also, federal agencies and courts are not always in agreement as to what is required for compliance.

Employers may assume that the Health Insurance Portability and Accountability Act applies to medical information collected and used by their wellness programs. In fact, whether HIPAA applies to a wellness program depends on how the program is structured.

Some employers offer certain incentives or rewards related to group health plan benefits, such as reductions in premiums or cost-sharing amounts, in exchange for participation in a wellness program. In most such cases (self-administered plans with fewer than 50 participants are the exception), the wellness program is considered part of the group health plan, so HIPAA protects the individually identifiable health information of program participants.

[Image credit: Bloomberg]
[Image credit: Bloomberg]

When an employer offers a wellness program directly, and not as part of a group health plan, however, HIPAA does not apply. But programs that are not subject to HIPAA may still be required to comply with other federal and state laws that regulate use of and access to medical information.

Employers need to be mindful of their obligations under anti-discrimination statutes when structuring and implementing wellness programs. But absent definitive guidance, the scope of an employer’s obligations remains unclear.

The Equal Employment Opportunity Commission has taken the position that a wellness program including disability-related inquiries complies with the Americans with Disabilities Act only if it is “voluntary.” In furtherance of this view, the agency released regulations in 2016 that would require employers to provide notices to employees about how the program will obtain and use medical information. The regulations also limit financial incentives (both rewards and penalties) to participate in a wellness program that is part of a group health plan and include disability-related inquiries or medical examinations to 30% of the total cost of employee-only coverage.

The EEOC also issued regulations under the Genetic Information and Nondiscrimination Act that require programs to obtain written authorizations from participating employee spouses. Financial incentives are capped at 30% of the annual cost of plan enrollment for the employee and any dependents

Even before the proposed regulations were issued, the EEOC filed suit against several employers, alleging that their wellness plans failed to comply with the ADA and/or GINA. One such employer was Wisconsin-based manufacturer Flambeau, Inc. The Flambeau program required employees to complete a health risk assessment and biometric testing in order to be eligible for company-sponsored health insurance. The EEOC argued that this requirement failed to comply with the ADA's prohibition against medical questions and examinations that are not voluntary and consistent with business necessity.

On Dec. 30, 2015, the court dismissed the EEOC's suit, holding that the program complied with a separate “safe harbor” in the ADA that exempts activities related to a bona fide insurance plan.[4] While this was good news for employers, it does not represent the final word on the subject. The EEOC appealed the Flambeau decision in February, signaling its intention to stand by its position that only voluntary wellness plans can be ADA-compliant.

Employers adopting wellness programs must comply with myriad federal laws aimed at protecting employee health privacy. Because the structure of the program can determine what laws and exemptions apply, employers should proceed carefully.

Register or login for access to this item and much more

All Employee Benefit News content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access